Switzerland: Fading Alpine rose

Date: 18/10/03

Can Switzerland regain its shine?

IT IS not a happy country. Switzerland's economy is stagnating, unemployment is rising, its airline still ails, Martin Ebner, a feted financier, has stumbled, and many Swiss insurers and banks are struggling. Last year saw the first labour unrest in 50 years. This September 25,000 people marched in Bern against pension cuts. So it is not surprising that the Swiss People's Party (SVP), an anti-foreigner party whose best-known spokesman is Christoph Blocher, may win the most votes in elections on October 19th. The SVP wants to keep foreigners out of Switzerland and Switzerland out of the European single market.

What has gone wrong in a country that was once a byword for prosperity? As in Germany, consensus politics and cosiness in corporate Switzerland, once the basis of the economy's success, have become an obstacle to reform. Old friends sit on each other's boards and back each other's management decisions, however misguided. Consensus has now started to crumble, but only slowly. Company boards are becoming more international. Last year's protests could herald more labour unrest.

Some argue that Switzerland's non-membership of the European Union makes it less competitive. If it were in the EU, Switzerland would have to reform its protected domestic market, says Roger de Weck, a journalist based in Zurich. It is easier for a German lawyer to work in France than for a lawyer from Geneva to set up shop in Zurich. But others, such as Mr Blocher, say the country would lose what is left of its competitive edge, as well as being swamped by immigrants, if it joined the EU.

Despite today's malaise, many countries would love Switzerland's problems. The country's three linguistic groups and its large contingent of foreigners (one-fifth of Switzerland's 7m inhabitants) get along well. Many Swiss multinationals, such as Nestle, a food manufacturer, or the drug giants Roche and Novartis, are doing fine. Unemployment is 3.7%, compared with over 9% in France and Germany. Even so, Switzerland will have to work harder at reform. That is a better cure than the isolationist fix that the SVP is campaigning for. After all, some of Switzerland's proudest corporate names, such as Swatch, a watchmaker started by the Beirut-born Nicolas Hayek, owe their existence to foreigners.